Choice "c" is correct. Equipment acquisitions that are misclassified as maintenance expense most
likely would be detected by internal control procedures that provide for investigation of variances
within a formal budgeting system.
Choice "a" is incorrect. Segregation of duties of employees in the accounts payable department
would not prevent the misclassification of equipment acquisitions as maintenance expense.
Choice "b" is incorrect. Verifying invoices for disbursements already recorded as equipment
acquisitions would not include examining invoices for disbursements recorded as maintenance
expense.
Choice "d" is incorrect. Since the authorization by the board of directors occurs before the
disbursement is recorded, this control would not prevent any misclassification.
